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CS Executive · Setting Up of Business, Industrial and Labour Laws · Selection of Business Organization

Three friends in Pune want to float a company in which members' liability is limited to the amount unpaid on their shares, and the shares cannot be offered to the public. Which company type suits them?

A private company limited by shares suits them. Members' liability is capped at the unpaid amount on their shares, and the company restricts share transfer and cannot invite the public to subscribe to its securities. A public company or unlimited company does not meet these conditions.

  1. APrivate company limited by sharesCorrect
  2. BPublic company limited by guarantee
  3. CUnlimited company
  4. DPublic company limited by shares

Explanation

A private company limited by shares restricts transfer of shares, prohibits invitation to the public to subscribe, and limits member liability to the unpaid amount on shares. A public company can invite the public, and an unlimited company gives no liability limit.

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